Wednesday, December 21, 2011

Of course, the owners of the Mets, who have spent the last four months trying to line up 10 or so minority partners, have some long-term upsides to sell: the $20 million would buy 4 percent of a New York City sports franchise that, history instructs, is likely to rise in value over time.

But for those perhaps uncertain over whether to part with their millions, the owners have listed some less obvious perks that would come with a share of the Queens ball club.

¶ Access to Mr. Met, the team mascot, although the degree of access is not entirely spelled out. It definitely means you, as a part-owner, can schmooze with Mr. Met at Citi Field. It’s less clear whether you could get him to come to your child’s birthday party without a fee.

¶ A formal business card, complete with the prominent designation: “Owner.”

¶ And if you are a wealthy doctor, commodities trader or real estate mogul who wants to try to swat the ball over the newly pulled-in outfield fences at Citi Field on a Mets day off, you are entitled to attend what appears to be an exclusive kind of fantasy camp: “Owners’ workout day.”

These benefits of ownership are laid out in a term sheet given by the Mets’ owners to prospective partners. The document, drawn up by the club’s investment banker and obtained by The New York Times, runs to three pages, and includes a mix of complex financial arrangements and, well, simpler stuff. ...

As for the more minor details, there was no shortage of specifics: the $20 million would include one free trip with the team during the regular season (the Mets would pick the city); one free weekend’s stay at spring training; and a lot of potential lunch dates — with broadcasters and former players. A luncheon with the manager and general manager? Off-season only, the document says. Merchandise? Discounts, but not giveaways.

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$20M seems high. What could I get for, say, $20K? As a .004% owner of the team, would I still be entitled to a business card? Could I attend board meetings? Invite to the corporate retreats? Time-share of an office in the stadium? Can I walk into any concession stand on game day and help myself to an order of nachos and a hot dog?

They're missing out here - rather than aiming big, they could probably get all kinds of people to pony up a few grand. Make it a telethon.

One of the weird things is that the minority owners each get a suite worth 500K or so a year. So if they get 10 minority owners they're going to lose 5 million a year in potential income right off the bat.

One of the weird things is that the minority owners each get a suite worth 500K or so a year. So if they get 10 minority owners they're going to lose 5 million a year in potential income right off the bat.

You're assuming a paying customer would want one. Think Cravath and Goldman Sachs partners are going to be falling all over themselves to take clients to see Chuck James pitch?

Rather than worrying about what expenses are deductible and which aren't, which wastes countless billions on tax professionals and attorneys, why not ditch the corporate income tax altogether and replace the revenue it raises with higher capital gains and dividends taxes? A GS or Cravath would have to justify to its shareholders why spending $500k on a box was a better use of corporate funds than returning $500k to shareholders. Right now, they can claim that the tradeoff is $500k on the box to $325k ($500k less 35% corporate tax rate) to shareholders.

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Also re: the suites, I assume that this news means they aren't exactly flying off the shelves at rack rates, otherwise they couldn't afford to give them away so easily...

Corps. are not taxed on revenue. Revenue is the corp. analogue to individual income.

There's a difference between accounting income and tax accounting income. In fact, to hit on one of the entries above, huge golden parachute or similar compensation payments are not deductible (or are deductible only up to a limit) for US income tax purposes,* even though those payments will certainly be reflected on the income statement as a business expense for the year and subtracted out on the way from gross revenue to net.

* Now rest assured, there are statutory exceptions to the general rule, and you can bet your ass that any Fortune 500 CEO has a compensation plan, complete with golden parachute, that has been designed to maximize the deductibility for income tax purposes. But in theory, this would be a huge difference between financial accounting and tax accounting.

Rather than worrying about what expenses are deductible and which aren't, which wastes countless billions on tax professionals and attorneys, why not ditch the corporate income tax altogether and replace the revenue it raises with higher capital gains and dividends taxes?

There's something to be said for this, but I just dwell on the fact that the putrid level of employment that we are currently experiencing is propped up by those corporations getting an "ordinary and necessary business expense" deduction that basically adds up to a de facto 35% government subsidy toward employment. If that subsidy were to get removed, what level of employment would we have then?

There's a difference between accounting income and tax accounting income.

I know that. But both are measures of profit. Corps are taxed on a profit measure. And, most ordinary business expenses are deductible for both. The things that get wonky are capital expenditures, depreciation, deferred acquisition costs etc.

I don't see getting particularly exorcised about Goldman being able to deduct some Mets tickets anymore than them being able to deduct car services for all their partners (which I'm sure are used strictly for business purposes)

The problem with corporations isn't that they spend too much, but that they have tightened their belts in anticipation of the weak economy that is the inevitable result of the same tightening. Corporations that blow money on luxury boxes are doing something good for the economy and should be applauded. Hell, maybe tax breaks on strippers and cocaine is the way to go.

There's a difference between accounting income and tax accounting income. In fact, to hit on one of the entries above, huge golden parachute or similar compensation payments are not deductible (or are deductible only up to a limit) for US income tax purposes,* even though those payments will certainly be reflected on the income statement as a business expense for the year and subtracted out on the way from gross revenue to net.

* Now rest assured, there are statutory exceptions to the general rule, and you can bet your ass that any Fortune 500 CEO has a compensation plan, complete with golden parachute, that has been designed to maximize the deductibility for income tax purposes. But in theory, this would be a huge difference between financial accounting and tax accounting.

Rather than worrying about what expenses are deductible and which aren't, which wastes countless billions on tax professionals and attorneys, why not ditch the corporate income tax altogether and replace the revenue it raises with higher capital gains and dividends taxes?

There's something to be said for this, but I just dwell on the fact that the putrid level of employment that we are currently experiencing is propped up by those corporations getting an "ordinary and necessary business expense" deduction that basically adds up to a de facto 35% government subsidy toward employment. If that subsidy were to get removed, what level of employment would we have then?

I'm a Democratic partisan, so I was disappointed in the 2010 midterm results anyway, but one thing I had hoped would come out of it would be a grand bargain on both the individual and corporate tax code.

I think a lot of people have this mistaken idea that you can "fix" the tax code and simplify it once and for all -- that's folly. I think it's an entirely reasonable idea that sometimes, in cases of economic down cycles, new technologies, financial and accounting evolution -- you'll always need to tinker.

Historically - we've had a substantial rewrite of the tax code every 25 years or so. Again - this is a healthy thing. The tax wonks get together and trim the hedges. Over the course of time, both for legitimate and fine reasons, and for purposes of favors to certain industries - the tax code gets larded up. So after another generation and change, Congress does a massive trimming of the hedges and the process begins again. This is a fine and healthy thing.

What's especially maddening is that though I'm a partisan Democrat and pretty liberal, it wouldn't be accurate to even put the blame solely on the GOP... Obama floated the idea of an '86 style rewrite in last year's SOTU -- and it was roundly and loudly criticized from the left. Geithner floated an idea to actually lower the topline corporate rate in exchange for a trimming of the deduction hedges... Again - wall-to-wall lambasting... which makes no sense because when you have so many fortune 500 companies paying nothing in taxes despite healthy margins, people shouldn't care so much about the topline number.

Now - to be fair, I do think Republican intransigence/GOP fanaticism about the Obama administration not getting anything they could call an accomplishment is at least, if not more, to blame for the utter failure of a grand tax reform bargain... but the fact that the administration couldn't afford any more Taibbi/et al screeds surely didn't help.

What's especially maddening is that though I'm a partisan Democrat and pretty liberal, it wouldn't be accurate to even put the blame solely on the GOP... Obama floated the idea of an '86 style rewrite in last year's SOTU -- and it was roundly and loudly criticized from the left. Geithner floated an idea to actually lower the topline corporate rate in exchange for a trimming of the deduction hedges... Again - wall-to-wall lambasting... which makes no sense because when you have so many fortune 500 companies paying nothing in taxes despite healthy margins, people shouldn't care so much about the topline number.

Basically it's a "five hundred and once bitten, five hundred and twice shy" situation. In the world we live in, with corporations so totally dominant over politicians, it's hard to imagine that these changes wouldn't end up being a reduction in the tax rate, elimination of loopholes, and the creation of new, virtually identical loopholes.

Just look at what happens to attempts to get money out of politics. In most countries economically comparable to us, there's nothing even vaguely similar to our system by which all candidates spend the bulk of their time hustling for money. It's ludicrous to think that this situation is "inevitable". And yet, the multiple high-profile supposed campaign-finance-reform measures have had no de facto effect on anything.

Basically it's a "five hundred and once bitten, five hundred and twice shy" situation. In the world we live in, with corporations so totally dominant over politicians, it's hard to imagine that these changes wouldn't end up being a reduction in the tax rate, elimination of loopholes, and the creation of new, virtually identical loopholes.

Sure - those will happen eventually... but that's the point - you trim the hedges back to a clean baseline and take it as a given that it will need to happen again. Good tax reform isn't a single 'thing' -- it's a process and one that will never end.

In some ways, things are different than 1986 -- but we still had rafts of lobbyists in 1986. We had even less election finance rules in place then. In a way - you can make the argument that the media explosion of the internet actually gave powerful interests more muscle back in the days when we basically had 3 national networks.

What you need are enough good public servants in all branches of government and in both parties who are willing to shut their ears and move forward with the necessary work. I really and truly believe we had/still have that in the administration. I think I could pick out enough legislators in both parties and both branches to get it done... unfortunately - I don't think those legislators have leadership positions in either chamber (Dick Durbin is the only one with any power in either chamber I'd be inclined to say could) and the ones who could do it are scared to death by the hyperpartisans.

This is one area where I really think the partisans outside of congress need to look in the mirror -- the 1986 reform wasn't 'popular' in the sense it was supported in any given camp, it was 'tolerated'... but it was a good policy. For that too happen again, I'm not saying the 'Tea Party' and the 'OWS' camps need to link arms and demand it -- I'm just saying that they need to take the foot off the gas for a minute and let the wonks do their work.

It won't happen in 2012 -- but I remain hopeful that post-election, assuming we still end up with some form of split government -- we can have another bite at the apple in 2013.

Geithner floated an idea to actually lower the topline corporate rate in exchange for a trimming of the deduction hedges... Again - wall-to-wall lambasting... which makes no sense because when you have so many fortune 500 companies paying nothing in taxes despite healthy margins, people shouldn't care so much about the topline number.

You answered your own question. Internationally diversified businesses basically like it as is. It's a massive (I would put that in 48 font if I could) competitive advantage for them over the smaller domestic-only businesses to be able to go "Double Irish" or whatever. Guess who also has the money to donate in large enough quantities to affect policy?

The current tax policy necessarily chases capital overseas, which I'd like to think is a bad thing no matter your political leaning.